Why an insurance company might set a deductible

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Reference no: EM1361117

1.Suppose that you would always turn down a 50-50 gamble between losing 10 and gaining 20. How much must your marginal utility decrease over an interval of 30?

2. a)Explain in words and with a picture why in a competitive insurance market, low risk consumers can get more insurance as high risk consumers become more risk averse.b) Name at least one reason why an insurance company might set a deductible. c)Can forcing everybody to buy full insurance at market rates ever hurt everybody? d) When can forcing everybody to buy full insurance at market rates help everybody?

3. a)Suppose college costs 1 to high quality workers, and high quality workers can produce 5. Suppose college costs 5 to low quality workers and low quality workers can produce 3. Can a competitive firm use salaries to tell who is who? b) Suppose college costs 5 to high quality workers, and high quality workers can produce 10. Suppose college costs 7 to low quality workers, and low quality workers can produce 8. Can a competitive firm use salaries to tell who is who?" "

Reference no: EM1361117

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